Owner's equity

Owner's equity

Owner's Equity

An individual or company's net worth. This is calculated by taking the value of all assets and subtracting the value of all liabilities. Owner's equity is used in determining an individual's or company's creditworthiness, and can be used in determining the value of a business when its owner or shareholders want to sell. It is important to note than owner's equity includes the value of intangible assets and liabilities.

A cumulative paid-in capital account would represent the cumulative sum of owner's equity as of the date of adoption of the portfolio accounting system, plus all capital contributions or withdrawals after that date.

Term loans up to 100 per cent of the purchase price of a new building are usually available, provided the value of the premises and the owner's equity in the assets of the business exceed the purchase price.

To apply Hurwicz's principle, an analyst fills in a worksheet, as shown in exhibit 2, page 61, in which the rows and columns show the decision choices and the possible outcomes in a business whose owner's equity is $5 million and the technology investment costs $2 million.

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